Long-time iPod manufacturer and current iPhone builder Foxconn Electronics has been selected by Apple to assemble the company's upcoming 3G iPhone handset, with volume shipments expected to begin this June, says a new report out of the Far East.

Citing sources at component suppliers as well as foreign institutional investors, the Chinese-language Commercial Times reports that the Taipei-based manufacturer was recently instructed by Apple to begin procuring component materials for the next-generation touch-screen handsets for an initial test build no later than the end of May.

Shipments of the 3G iPhone are expected to top three million units in June with the model likely to ship a total of 24-25 million units throughout its life-cycle, the paper added.

Since introducing its first-generation iPhone last June, Apple has managed to sell just shy of 6 million units with help from exclusive wireless partners in the US, UK, Germany, France, Austria and Ireland. However, a flurry of recent reports have suggested the Cupertino-based company will forgo exclusive carrier contracts as it expands distribution of the handsets to additional European nations and portions of Asia around the same time it unveils its 3G offering.

Specifically, Italian newspaper Repubblica reported last week that Apple had inked a deal with Telecom Italia Mobile (TIM) to begin selling a 3G iPhone through the carriers retail shops. The report added, however, that the exclusivity to TIM would last only a few months and that other Italian carriers would immediately be free to offer the handset, which would ship unlocked, to their own customers.

That report added to similar claims emerging out of Australia and was soon followed by an almost identical report out of Belgium. In the case of the latter, regional publication Astel.be. cited sources in saying that three Belgian carriers -- Proximus, Mobistar and BASE -- were each creating special data packages for the 3G iPhone, and that Mobistar would likely have a several month exclusive to market the handset through its retail shops like Italy's TIM.

Sales of iPhones have thus far been described as lackluster in Europe, as customers largely chose to forgo the existing model in favor of waiting for a version capable of taking advantage of third-generation wireless networks, which are most prevalent in the region.

As such, the iPhone currently stands as a relatively minor contributor to Apple's top line, generating only 2-3 percent of the company's revenue. However, analysts on Wall Street believe that sales of the device one day become as large as the the company's current Mac business, fueling approximately $15 - $20 billion in annualized revenue, as the iPhone capitalizes on a global handset market ten times the size of the worldwide PC market.

In March, Commercial Times reported that Foxconn was amongst those Taiwanese assemblers bidding on Apple's 3G iPhone contract, with DowJones claiming shortly thereafter that a deal between the two companies had been reached.

Sales of iPhones have thus far been described as lackluster in Europe, as customers largely chose to forgo the existing model in favor of waiting for a version capable of taking advantage of third-generation wireless networks, which are most prevalent in the region.

...a flurry of recent reports have suggested the Cupertino-based company will forgo exclusive carrier contracts as it expands distribution of the handsets to additional European nations and portions of Asia around the same time it unveils its 3G offering.

At this point, single carrier exclusives are holding Apple back. And an Asian launch around the same time as the 3G launch? VERY nice, if true.

I mean, really? The report only says that Apple expects to sell that many during the model's lifecycle. Have they really walked up to manufacturer and said, "Yes, we'd like 25 million of these ASAP, please."

Assuming just 20 million over the life cycle of a year-and-a-half, $400 per phone, 17.5% operating margin (Apple's average for the last quarter), and a forward P/EBIT of 20 (it is currently in the mid-20s), that could mean an extra $28 billion in market cap - or, roughly an extra $31 per share.

But we don't know off of what base, since the market has, quite likely, factored some of this into the current price already.... i.e., it may not necessarily be on top of the $170 it's at today.

(This is all, of course, overly simplified analysis: one would have to subtract from it the impact on iPod sales, but consider offsetting factors such as sharing arrangements with carriers and such).

Tim Cook is gay, believes in climate change, and cares deeply about racial equality. Deal with it (and please spare us if you can't).

I mean, really? The report only says that Apple expects to sell that many during the model's lifecycle. Have they really walked up to manufacturer and said, "Yes, we'd like 25 million of these ASAP, please."

Or it may be that they placed the order but with staggered timetables of how many are needed when. I think Jobs said at a WWDC that they had to plan their production rate and quantities more than six months in advance. I think it's just to make sure there's enough capacity to keep up with demand.

Or it may be that they placed the order but with staggered timetables of how many are needed when. I think Jobs said at a WWDC that they had to plan their production rate and quantities more than six months in advance.

Yeah, but can you really predict with any accuracy how something's gonna sell a year or more out? \

Because 25 million is one or two years of iPhones, in all likelihood. Will the hardware be the same in 2010?

This is an incredible story. The IPhone has to be the archetypal business school case study on how to launch a product. The control and feedback Apple got through single carrier exclusive deals is only equal to the explosion of sales that will occur when Apple gives Asia and Europe what it most wants in a phone; 3G.

Nokia must be peeing in its proverbial pants. Of course, Apple isn't gunning for Nokia; it's got RIM in its sights. Terminate with extreme prejudice.

Nokia must be peeing in its proverbial pants. Of course, Apple isn't gunning for Nokia; it's got RIM in its sights. Terminate with extreme prejudice.

I wonder if their main focus is RiM or not a equal focus on both business and consumers. There is a lot of evidence to suggest that the majority of iPhone users are new to smartphones. While the millions sold are a drop in the bucket compared to the total worldwide sales of Nokia, Apple is taking the most desirable customers, just like they do with the Mac platform.

Quote:

Originally Posted by vinney57

I stand by my 60 million iPhones over the next two years prediction; (which I still think is conservative).

3G, v2.0 w/ Exchange and 3rd-party app store, and unlocked in many new countries certainly will cause and explosion of sales. But by how much?

I'm predicting 10M in 6 months of 3G launch seem conservative. Which is 40M over 2 years if the sales stay stagnant. But they won't, so it looks like our estimates are about on par.

Dick Applebaum on whether the iPad is a personal computer: "BTW, I am posting this from my iPad pc while sitting on the throne... personal enough for you?"

Yeah, but can you really predict with any accuracy how something's gonna sell a year or more out? \

Because 25 million is one or two years of iPhones, in all likelihood. Will the hardware be the same in 2010?

.

They're probably using the iPod model for predicting future sales. They believe the iPhone will be as popular as the iPod was and practically everyone in each family will own one. On a worldwide scale I'd hardly think that 25 million iPhones in a year would be too much of a stretch. Once the SDK is done and corporate e-mail becomes standard on the iPhone, sales should be boosted dramatically. It may even be well received as a gaming machine. I really think it will become an extremely versatile device. Windows Mobile and Palm handsets will be thrown away to be replaced with iPhones. Even the great RIM machine will lose market share to the iPhone.

As to your question about predicting future sales in reality. It can't be done with much accuracy. As an Apple investor, I just let my dreams run wild and pray the iPhone sells by the gazillions. I've already choreographed my victory dance when Apple's stock price reaches $250 this year.

I mean, really? The report only says that Apple expects to sell that many during the model's lifecycle. Have they really walked up to manufacturer and said, "Yes, we'd like 25 million of these ASAP, please."

.

Bet they do and bet the sell out

From Apple ][ - to new Mac Pro I've owned them all.Long on AAPL so biased"Google doesn't sell you anything, Google just sells you!"

At this point, single carrier exclusives are holding Apple back. And an Asian launch around the same time as the 3G launch? VERY nice, if true.

If Apple came out with a world phone, both GSM & CDMA, then there would be no market they could not enter. I'm hopping that the AT&T contract ends no later than June 09 so Apple could sell into the Verizon market. That should be easy now that Verizon allows any phone on their network.

three Belgian carriers -- Proximus, Mobistar and BASE -- were each creating special data packages for the 3G iPhone, and that Mobistar would likely have a several month exclusive to market the handset through its retail shops like Italy's TIM.

This is the biggest advantage that came from starting with exclusive deals. Apple has now set up an expectation of how the iPhone will be used and operated. Carriers will be expected to offer unlimited data packages and will have to compete on price.

Assuming just 20 million over the life cycle of a year-and-a-half, $400 per phone, 17.5% operating margin (Apple's average for the last quarter), and a forward P/EBIT of 20 (it is currently in the mid-20s), that could mean an extra $28 billion in market cap - or, roughly an extra $31 per share.

But we don't know off of what base, since the market has, quite likely, factored some of this into the current price already.... i.e., it may not necessarily be on top of the $170 it's at today.

(This is all, of course, overly simplified analysis: one would have to subtract from it the impact on iPod sales, but consider offsetting factors such as sharing arrangements with carriers and such).

Your numbers in the first paragraph though are low... $400 per phone is low, I think we might just see $700 unsubsidized iPhones, and $400 subsidized with contract. Either way Apple gets far more than $400. Also the current forward PE is 27. Finally yes, there's no way of telling how much of that is already baked in, probably a lot of it.

If Apple came out with a world phone, both GSM & CDMA, then there would be no market they could not enter. I'm hopping that the AT&T contract ends no later than June 09 so Apple could sell into the Verizon market. That should be easy now that Verizon allows any phone on their network.

I'd have the whole family on the iPhone if it were on Verizon. Verizon is the only reliable reception in our area.

Despite having to compete against the iPhone for 9 months out of the last fiscal year, as well as the announced but not shipping iPhone 5 months prior to that, RIMM still doubled their revenue.

Oh, I'm not saying the iPhone will kill RIMM. I'm saying what's the assumption built into its current stock valuation? That there will be no meaningful competition coming from the iPhone? Especially in the consumer market? Especially with iPhone turning 3G?

See your numbers are for the current, 2.5G iPhone. I don't know if it's all hype but seems to me the whole world has been waiting for the 3G version.

Your numbers in the first paragraph though are low... $400 per phone is low, I think we might just see $700 unsubsidized iPhones, and $400 subsidized with contract. Either way Apple gets far more than $400. Also the current forward PE is 27. Finally yes, there's no way of telling how much of that is already baked in, probably a lot of it.

I was purposely being conservative at every stage. And, I was multiplying by P/EBIT, not P/E. Please read my post again.

Tim Cook is gay, believes in climate change, and cares deeply about racial equality. Deal with it (and please spare us if you can't).

I mean, really? The report only says that Apple expects to sell that many during the model's lifecycle. Have they really walked up to manufacturer and said, "Yes, we'd like 25 million of these ASAP, please."

Well, I doubt it is as simple as you sarcastically offer--there is probably more to this kind of deal than we ever see.

Apple might only put in an order for the Chinese manufacturer (Foxconn Electronics) for X million but tell them that they anticipate Y million over the course of 12 months. The manufacturer has to know what size facility to procure, how much material to gather and how many employees to hire. When the manufacturer bids out the contract, they need to know what kind of economies of scale they are going to be able to take advantage of to give an accurate bid.

I would not be in the least surprised for there to be benchmarks in the contract for manufacture that obligate Apple to compensate the manufacturer if some minimum (Y) is not achieved even when Apple only orders X initially. These manufacturers work off a relatively thin margin; I cannot see them assuming all the risk--it would not be worth it. Apple probably has to shoulder the risk, but that is OK because they are the ones who stand to gain HUGE profits if they can pull off what they are attempting.

So to rephrase your quote with another that is still simplistic but more realistic in my eyes, maybe Apple walks up to the manufacturer and says "Give us a price to build this phone. Well take 5 Milion by August but you have to have capacity to produce 25 million by next June. If we don't order at least 18 million in that time frame, we will pay you a penalty of 10$ million to cover capital costs."

Quote:

Originally Posted by AppleInsider

Citing sources at component suppliers as well as foreign institutional investors, the Chinese-language Commercial Times reports that the Taipei-based manufacturer was recently instructed by Apple to begin procuring component materials for the next-generation touch-screen handsets for an initial test build no later than the end of May.

Think about it, Foxconn would have to have some idea of what they were aiming for and maybe some guarantees before "procuring component materials.

Quote:

In March, Commercial Times reported that Foxconn was amongst those Taiwanese assemblers bidding on Apple's 3G iPhone contract, with DowJones claiming shortly thereafter that a deal between the two companies had been reached.

If Apple came out with a world phone, both GSM & CDMA, then there would be no market they could not enter. I'm hopping that the AT&T contract ends no later than June 09 so Apple could sell into the Verizon market. That should be easy now that Verizon allows any phone on their network.

Verizon won't have a chance at the iPhone until it transitions to LTE for its data network.

Verizon won't have a chance at the iPhone until it transitions to LTE for its data network.

We really don't know that, actually. It could happen well before LTE.

Building two versions of the same phone (CDMA and GSM) isn't all that difficult. The issues are known, the parts and chipsets are readily available. Motorola, which among phone makers seems to be having the hardest time executing, didn't find it too hard to do with the RAZR.

The true hurdle to the iPhone getting on Verizon (and/or Sprint) is really the business deal. Will Verizon accept Apple's terms? They've said no once already. \

Regarding some of the sky-high sales estimates put out in this thread by people... wow.

I mean, I definitely do believe that 3G will improve iPhone sales a lot, as will the 2.0 software, and the availability of the iPhone in more markets. But some of these sales estimates/expectations from people are just in the stratosphere. No, scratch that, they're in the Van Allen belts. And this, with the US entering recession?

Apple might only put in an order for the Chinese manufacturer (Foxconn Electronics) for X million but tell them that they anticipate Y million over the course of 12 months. The manufacturer has to know what size facility to procure, how much material to gather and how many employees to hire. When the manufacturer bids out the contract, they need to know what kind of economies of scale they are going to be able to take advantage of to give an accurate bid.

I would not be in the least surprised for there to be benchmarks in the contract for manufacture that obligate Apple to compensate the manufacturer if some minimum (Y) is not achieved even when Apple only orders X initially. These manufacturers work off a relatively thin margin; I cannot see them assuming all the risk--it would not be worth it. Apple probably has to shoulder the risk, but that is OK because they are the ones who stand to gain HUGE profits if they can pull off what they are attempting.

So to rephrase your quote with another that is still simplistic but more realistic in my eyes, maybe Apple walks up to the manufacturer and says "Give us a price to build this phone. Well take 5 Milion by August but you have to have capacity to produce 25 million by next June. If we don't order at least 18 million in that time frame, we will pay you a penalty of 10$ million to cover capital costs."

What you and AI both seem to be talking about is more an estimate than a solid order.

It may be how business is done (or may not be), but the article title is still misleading. Perhaps "ongoing agreement with a target of 25 million" might be closer.

Seems to me like apple signed a one year with AT&T that ends on June 29,2008. June 29 , 2008, Apple comes out with 2G -3G phone that does both edge and 3 G. Any carrier in the world can use it . Video ichat ,, new camera , video capture with voice. Decent price and u sold 100 million in 2009 . Just like the Razr phone did.

Seems to me like apple signed a one year with AT&T that ends on June 29,2008. June 29 , 2008, Apple comes out with 2G -3G phone that does both edge and 3 G. Any carrier in the world can use it . Video ichat ,, new camera , video capture with voice. Decent price and u sold 100 million in 2009 . Just like the Razr phone did.

That would be nice for many, but I can't imagine that being the deal that was penned. Personally, being a US citizen I will continue to use AT&T and so paying several hundred dollars more for the phone just so I can take it to T-Mobile where 3G isn't compatible makes absolutely no sense to me. I don't want a CDMA phone either as I travel often.

Dick Applebaum on whether the iPad is a personal computer: "BTW, I am posting this from my iPad pc while sitting on the throne... personal enough for you?"

We really don't know that, actually. It could happen well before LTE. The true hurdle to the iPhone getting on Verizon (and/or Sprint) is really the business deal. Will Verizon accept Apple's terms? They've said no once already.

No its not difficult. I'm sure Apple isn't thinking about Sprint. Why produce a CDMA for Verizon when you know it will offer LTE in a few years.